Ebay tax reporting drops from $20,000 to $600

[FrankWakefield]

I had a tax professor who left the classroom for a couple of weeks to go to DC to help with the Tax Reform Act of 1986. And when that Act became law it set things in motion that culminated in the greatest loss of life of Americans ever, occurring on April 15, 1987.

Just over 5 million Americans vanished. Before the Tax Reform Act of 1986, someone filing a 1040 just listed a number for minor children in the household. But the TRA of 86 placed a requirement of listing a minor child's SS# on the new returns. Taking into consideration that 17 year olds from the previous year would have turned 18, and subtracting out newborn children for that tax year, the returns filed in 1987 showed that there were just over 5 million kids who were claimed as dependents the previous year and who should be showing up on the 1987 returns for tax year 1986, but no one claimed them. Those kids vanished.

In the old days newborns didn't get a SS# application sent in as part of being in the hospital. I didn't. A few years after my (younger) brother was born, I recall Dad showing me that a SS card had arrived in the mail for me. Mom and Dad applied for both of us. Dad kept up with the cards, I was maybe 8 or 9, and if I'd gotten it then I'd have lost it. My brother and I have consecutive SS#s. About 30 years later my twins are born, the hospital is getting info for SS applications, and when their cards arrive their numbers are quite different. My old card has a line on it on the front, "not to be used for identification purposes," which greatly amuses me because that's exactly how it's used and they no longer put that on the cards.

[BobC]

Originally Posted by FrankWakefield

I had a tax professor who left the classroom for a couple of weeks to go to DC to help with the Tax Reform Act of 1986. And when that Act became law it set things in motion that culminated in the greatest loss of life of Americans ever, occurring on April 15, 1987.

Just over 5 million Americans vanished. Before the Tax Reform Act of 1986, someone filing a 1040 just listed a number for minor children in the household. But the TRA of 86 placed a requirement of listing a minor child's SS# on the new returns. Taking into consideration that 17 year olds from the previous year would have turned 18, and subtracting out newborn children for that tax year, the returns filed in 1987 showed that there were just over 5 million kids who were claimed as dependents the previous year and who should be showing up on the 1987 returns for tax year 1986, but no one claimed them. Those kids vanished.

In the old days newborns didn't get a SS# application sent in as part of being in the hospital. I didn't. A few years after my (younger) brother was born, I recall Dad showing me that a SS card had arrived in the mail for me. Mom and Dad applied for both of us. Dad kept up with the cards, I was maybe 8 or 9, and if I'd gotten it then I'd have lost it. My brother and I have consecutive SS#s. About 30 years later my twins are born, the hospital is getting info for SS applications, and when their cards arrive their numbers are quite different. My old card has a line on it on the front, "not to be used for identification purposes," which greatly amuses me because that's exactly how it's used and they no longer put that on the cards.

I remember those days Frank, forgot about that sudden loss of kids being claimed as dependents. That was another crazy result from that 1986 tax act being passed. Nowadays a baby doesn't leave the hospital without a social security number at least being applied for.

Do you remember the phase-in/phase-out of certain deductions created by the Reform Act, or the impact the brand new Passive Loss Rule had on the nation's economy? Ugh!!! People often look back at how after the 2008 mortgage loan debacle the government stepped in to save businesses and our economy, and may think of that as the first time our government has had to cross the line and directly take over and deal with private businesses like that, at least since the Great Depression. They may have forgotten what happened after the Tax Reform Act of 1986 was passed and the feds had to form the Resolution Trust Corporation to deal with the aftermath of that legislation.

[frankbmd]

Originally Posted by BobC

I remember those days Frank, forgot about that sudden loss of kids being claimed as dependents. That was another crazy result from that 1986 tax act being passed. Nowadays a baby doesn't leave the hospital without a social security number at least being applied for.

.........

Are social security applications available on the Rio Grande?

[BobC]

Originally Posted by frankbmd

Are social security applications available on the Rio Grande?

That's a good one Frank! LOL

That brings up the law giving anyone born on US soil automatic citizenship, jus soli. That thinking/law exists in only about 33 countries in the world, almost all exclusively in the American continents.

So are you for or against "anchor babies"?

[Snowman]

Originally Posted by frankbmd

Are social security applications available on the Rio Grande?

Originally Posted by BobC

That's a good one Frank! LOL

That brings up the law giving anyone born on US soil automatic citizenship, jus soli. That thinking/law exists in only about 33 countries in the world, almost all exclusively in the American continents.

So are you for or against "anchor babies"?

I see the racists showed up to the party. Good to know.

[Dandor]

I am really confused on what to do now for taxes. In the past I just kept spreadsheets and paid taxes on net profits. However, eBay accidentally sending out 1099-K forms has me a little worried.

eBay assured all California people that got 1099-K forms in the mail that this was a mistake and that they didn't send the forms to the IRS/California Franchise Tax Board. I for one can't trust eBay and I have no idea if they are telling the truth here.

If I use the 1099-K form that eBay gave me and the IRS/CFTB didn't get it, would this raise red flags? Or would they not care?

I am leaning towards using this 1099-K form, even if eBay says to disregard it. I have a feeling that I will do my taxes as usual and if I don't use the 1099-K form and eBay actually sent it, that I would get a bill for the 1099-K and have to amend my taxes to deal with this nonsense.

For people in California who got the 1099-K form we are supposed to throw out because it was a mistake, what are you going to do? Are you going to ignore it or use it?

[KCRfan1]

I received my tax form from eBay last week.

What the form does not indicate is the amount I PAID for the cards I sold.

The dollars on the tax form assume this is pure profit, when I could have actually LOST money. In any case, it is not pure profit because I had to purchase the cards.

[BobC]

Originally Posted by Dandor

I am really confused on what to do now for taxes. In the past I just kept spreadsheets and paid taxes on net profits. However, eBay accidentally sending out 1099-K forms has me a little worried.

eBay assured all California people that got 1099-K forms in the mail that this was a mistake and that they didn't send the forms to the IRS/California Franchise Tax Board. I for one can't trust eBay and I have no idea if they are telling the truth here.

If I use the 1099-K form that eBay gave me and the IRS/CFTB didn't get it, would this raise red flags? Or would they not care?

I am leaning towards using this 1099-K form, even if eBay says to disregard it. I have a feeling that I will do my taxes as usual and if I don't use the 1099-K form and eBay actually sent it, that I would get a bill for the 1099-K and have to amend my taxes to deal with this nonsense.

For people in California who got the 1099-K form we are supposed to throw out because it was a mistake, what are you going to do? Are you going to ignore it or use it?

Dandor,

What EXACTLY did Ebay say in their communication to you? Sending you a 1099-K form if you had not yet met the required threshold for 2021 in and of itself is technically not a mistake. The rule simply mandates that someone like Ebay must prepare and send you a 1099-K form when your sales (and number of transactions in 2021) reach a certain amount. If you didn't reach those threshold amounts, there's no law or rule that says Ebay (or whomever) still can't send you a 1099-K reporting your 2021 sales, regardless of what they were.

So when you said they told you it was sent in error, could they possibly mean the sales amount being reported on the 1099-K form they sent was wrong, and that is why you should disregard the 1099-K form, and also why they didn't go ahead and send copies of the form to the IRS and CFTB?

So, does your record of Ebay sales agree with what is on the 1099-K form you got? If not, see if you can reconcile it and figure out what the difference is. At least start there.

From what you're saying, it sounds like you've been reporting your past Ebay sales on your tax returns all along. If that is the case, reporting your sales on your 2021 tax returns shouldn't raise any red flags with tax authorities, even if Ebay sent no 1099-K forms in to them regarding your 2021 sales. The only red flag that would potentially be raised is if Ebay did send in a 1099-K form to the IRS/CFTB for your 2021 sales, and you did not also report AT LEAST the same amount of taxable sales on your returns as was reported on the 1099-K form(s) you got for last year.

Hope this helps at least a bit, but again, let me know exactly what Ebay actually said to you. Seeing the actual correspondence would probably be the best way to do that. For privacy purposes though, might be better to PM me, unless you can redact/hide your personal info.

NEVER SEND PERSONAL DATA ONLINE UNLESS YOU CAN HIDE/REDACT THE PERSONAL INFO, OR SEND IT IN AN ENCRYPTED FORMAT OR AS A PASSWORD PROTECTED DOCUMENT!

Thanks,

BobC